"One terrorist was shot dead," police said in a statement. A police spokesman said a second gunman had taken part in the attack and was moderately wounded by Israeli forces.
One of the gunmen had a rifle and the other was armed with a pistol, police said.
Medical officials said six people were rushed to hospital, two of them in serious condition, two moderate, and two lightly wounded.
The shooting was the latest in a series of attacks by Palestinians targeting civilians and security forces in Israel and the West Bank in a wave of violence and unrest raising fears of a full-scale Palestinian uprising.
Including alleged assailants, 42 Palestinians have been killed since an upsurge in violence began on October 1, while seven Israelis have lost their lives.